...and it is causing the economy to go into a tailspin. Hmm. I wonder if there's a lesson to be learned from this.

Numbers (2) and (4) are contractionary. Numbers (1) and (4) are expansionary, but (1) is undertaken by the Bank of England (not the Cameron government) and I don't think (4) has been implemented yet, has it?

Lower spending, higher VAT (as I recall), and recession in Europe are the drivers.

RickyWilliams'sBong:Numbers (2) and (4) are contractionary. Numbers (1) and (4) are expansionary, but (1) is undertaken by the Bank of England (not the Cameron government) and I don't think (4) has been implemented yet, has it?

Lower spending, higher VAT (as I recall), and recession in Europe are the drivers.

Does the Cameron government have no influence on Bank of England policies?

RickyWilliams'sBong:Lower spending, higher VAT (as I recall), and recession in Europe are the drivers.

Its the downturn in the construction industry thats the problem (a whole 3%). Which is realy strange as we have a houseing shortfall. Its almost as if the big house building companies are happy to stop building much to preserve the house price bubble.

David Cameron took power in 2010 - I'm not sure what kind of yardstick going back to 2007 (pre-global financial crisis) is. Also, the total size of the budget is not as important a measurement as income and expenditures. In any case, the expenditures in Osborne's first 2010 "Emergency Budget" were £697 billion, the 2011 budget had £711 billion total, and 2012's budget was at £682 billion. The deficit has shrank from £149 billion to £90 billion.

Cameron and Osborne reacted to a slight economic recovery in 2010 with a plan to try to cut the deficit ASAP to reassure the markets, and that is what they have done three years in a row. The markets have not been particularly reassured - the UK economy has flatlined in terms of growth, unemployment's up since 2010 and consumer spending is down, real incomes have been hit particularly badly, and now they've landed in a recession yet again. And the cuts they initially made are mostly going to begin to kick in now, which is really terrible timing.

This was GDP growth before they released today's figures:

Instead of the very slight Q1 increases from before it's -0.2% in Q1 2012. Hence, recession status.

At least in theory, (1) is expansionary because (albeit by increasing inflation) it provides capital to the banks who can then lend it to business owners. (Or in the US, they can lend their "free" money to the government at 4%, which kinda defeats the purpose, but that's another story altogether).

At least in theory, (4) is expansionary because it provides capital to the rich people who then take that excess capital and invest it in the economy.

I buy (1) better than I buy (4), but I can see both of them (Or at least see how others could see both of them).

/And as I understand it, most of economics is "At least in theory" and anyone who says otherwise is trying to pull a fast one. Some theories are stronger than others, but there are very few "facts".

At least in theory, (1) is expansionary because (albeit by increasing inflation) it provides capital to the banks who can then lend it to business owners. (Or in the US, they can lend their "free" money to the government at 4%, which kinda defeats the purpose, but that's another story altogether).

At least in theory, (4) is expansionary because it provides capital to the rich people who then take that excess capital and invest it in the economy.

I buy (1) better than I buy (4), but I can see both of them (Or at least see how others could see both of them).

/And as I understand it, most of economics is "At least in theory" and anyone who says otherwise is trying to pull a fast one. Some theories are stronger than others, but there are very few "facts".

Economics is called "the dismal science" for a reason, but that being said there has been enough study of the effect of tax cuts on the wealthy to understand that they're among the least effective forms of government spending in a recession.

meyerkev:At least in theory, (1) is expansionary because (albeit by increasing inflation) it provides capital to the banks who can then lend it to business owners. (Or in the US, they can lend their "free" money to the government at 4%, which kinda defeats the purpose, but that's another story altogether).

At least in theory, (4) is expansionary because it provides capital to the rich people who then take that excess capital and invest it in the economy.

And both are bullshiat. Sorry.The US has been trying both for 30 years, and the only thing the big players do is move the free money out of the country. Giving banks the leverage needed to lend money doesn't help citizens if all that money is used to loan money for expansion in China, nor has giving capital to the already wealthy EVER been shown to benefit the citizens of the country handing out the capital.Both are "expansionist" only if you think growing operations in a foreign world country does anything for the country that enacted those policies.

Economics is called "the dismal science" for a reason, but that being said there has been enough study of the effect of tax cuts on the wealthy to understand that they're among the least effective forms of government spending in a recession.

MugzyBrown:Economics is called "the dismal science" for a reason, but that being said there has been enough study of the effect of tax cuts on the wealthy to understand that they're among the least effective forms of government spending in a recession.

It's sad people believe tax cuts are a form of government spending

The ARRA cut taxes beyond the baseline established in the continuing resolution that the government was operating under at the time. As such, it's spending. When taxes are cut as part of a budget or CR then that's part of the baseline, not spending.

The US economy has outpaced Europe and Britain since the start of the recession. I used to be an extreme deficit hawk, but the data that keeps appearing shows that austerity in the face of a recession is just a terrible idea.

Borrow and spend during the recession, run a surplus during the good times.

Hmm, I wonder why nobody ever thought of that idea before. It's so obvious you'd think there'd be a common name for it, perhaps the after the economist that discovered it. They'd be lauded as the greatest economist of all time. Since that appears to be me, I'll call it Glockenspielian economics. See you all in Sweden!

Stile4aly:Economics is called "the dismal science" for a reason, but that being said there has been enough study of the effect of tax cuts on the wealthy to understand that they're among the least effective forms of government spending in a recessionthe only way to enable Job CreatorsTM the ability to save us poor wretches down here.

The US economy has outpaced Europe and Britain since the start of the recession. I used to be an extreme deficit hawk, but the data that keeps appearing shows that austerity in the face of a recession is just a terrible idea.

Borrow and spend during the recession, run a surplus during the good times.

Hmm, I wonder why nobody ever thought of that idea before. It's so obvious you'd think there'd be a common name for it, perhaps the after the economist that discovered it. They'd be lauded as the greatest economist of all time. Since that appears to be me, I'll call it Glockenspielian economics. See you all in Sweden!

Canada would be a good example of a country that was paying down debt before the crisis and was therefore able to provide reasonable government stimulus when merited.

MugzyBrown:Stile4aly: Actually, the act of deficit spending employs real people who then use their paychecks and spend money which further stimulate the economy. It has a multiplying effect.

It doesn't really, but it's the story they sell.

If that's the case, why can't we just increase the deficit 100x's and everybody lives like kings? Think of the multiplier effect!

When the gov't cannot create an economy, it can only distort it. The gov't is funded BY the economy, so everything it spends is due to somebody else not spending or saving that money themselves.

When the gov't spends with borrowed funds, then the economy has to pay the gov't with interest.

GD you're farking stupid. Why do you even bother to engage in these threads? You're obviously way too stupid to say anything coherently, let alone debate or convince anybody. So why do you waste so much time in these threads?

Stile4aly:If that's the case, why can't we just increase the deficit 100x's and everybody lives like kings? Think of the multiplier effect!

I hope that you're trolling, because it's scary to think that you are this stupid (also, this is a fairly common talking point).

Nobody is arguing that this would work. The argument "Some of this is good, so a huge amount must be great!" applies to pretty much nothing in reality. It is the argument that is bogus, not the merits of expansionary fiscal policy. Your suggestion would cause massive inflation and everyone with half a brain already knows that.

Deficit spending can be positive if spent on public works projects that provide long lasting (multi-generational) benefit to the nation - rather than throwing bags of money at the wealthy in return for nothing.

Now, building bigger and larger dams is not what I'm suggesting. However, a competently executed national upgrade the the Internet could set the stage for the next hundred years of prosperity.

/100Mbps should be the standard residential speed.//Like it is in some places.

MugzyBrown:Stile4aly: Actually, the act of deficit spending employs real people who then use their paychecks and spend money which further stimulate the economy. It has a multiplying effect.

It doesn't really, but it's the story they sell.

If that's the case, why can't we just increase the deficit 100x's and everybody lives like kings? Think of the multiplier effect!

Nothing like a little reducio ad absurdum.

When the gov't cannot create an economy, it can only distort it. The gov't is funded BY the economy, so everything it spends is due to somebody else not spending or saving that money themselves.

Let's say I grant that the government can only distort the economy. So what? Let's say the economy is in recession and the government distorts it so that the recession ends and the economy begins growing again. If the growth is self sustaining then why does it matter that it originated in a distortion? Economics is simply a function of mass psychology. People are not possessed of perfect information, they act based on emotion and a limited understanding of the events around them. If things look to be going well, they'll act as if things are going well which will then cause things to go well.

When the gov't spends with borrowed funds, then the economy has to pay the gov't with interest.

So? The whole point is that the economy will improve and will have the capacity to pay off the debt. It's akin to saying that I shouldn't have a mortgage because I can't afford to pay off the whole thing at once.